Buy to let and other investors hoping for a rapid recovery in the prime central London market are likely to be disappointed.
Savills has now admitted that “the long-awaited bounce in values in prime central London has been pushed out to 2023.”
The firm expects prime central London’s house prices to grow 4.0 per cent across 2022, down from the agency’s previous forecast of 8.0 per cent.
Savills claims this reflects a slower pace of return of international buyers than anticipated, as well as the war on Ukraine and current UK domestic political instability which have caused a degree of caution that is constraining price growth. It now expects more growth next year than it originally stated - up 7.0 per cent in 2023, rather than 4.0 per cent.
Over the next five-years, prices in prime central London are expected to rise by a total of 21.6 per cent, despite a slight slowing of growth in the run-up to the expected general election in 2024.
“Strong activity over the past six months, the relative value on offer and the prospects for global wealth generation together give us confidence that prime central London will continue to recover steadily over the next couple of years” comments Frances McDonald, research analyst at Savills.
“However, the pace of return of international buyers has so far been slow, holding back the more rapid recovery we had previously anticipated. Early indicators suggest that things should improve over the second half of the year and into 2023, as high-net-worth buyers have gradually started to return to traditional prime postcodes such as Chelsea, Belgravia, Kensington, Mayfair, Notting Hill and Holland Park over the past three-months, boosting the outlook for price growth beyond this year.
“In the longer term, requirements to register beneficial ownership of homes held in offshore vehicles have the potential to curb some demand amongst a limited number of buyers in the longer term. But, while historically there have been many benefits to using offshore vehicles to hold UK property, the tax advantages have largely already been removed. As such, we have only slightly reduced our outlook for prices over the next five years.”
In the more domestic markets of outer prime London, continued unmet demand from those looking to upsize and a lack of suitable stock will support price growth in the short term and Savills forecasts price growth in these markets will average 5.0 per cent throughout this year.
But the cost of living crisis will restrict price growth in this outer London region.
“From 2023 onwards we are forecasting slightly lower levels of price growth with rising pressure on buyers’ spending power, though the effect of earlier than expected interest rate rises is likely to be offset by an easing in mortgage regulation and an increased flow of capital coming out of central London” says McDonald.